A buying spree for vineyards, wineries
Dozens of North Coast wineries, vineyards change hands in past year
Published: Sunday, March 24, 2013 at 4:03 a.m.
Last Modified: Sunday, March 24, 2013 at 8:52 a.m.
On the afternoon last month when winemakers David and Carla Ramey set out to inspect the 75-acre vineyard for sale west of Healdsburg, they knew they had to act fast. They had been looking for a vineyard for years and felt a keen sense of competition from other wine companies branching out to secure supplies of premium grapes.
A SAMPLING OF RECENT DEALS
Key transactions involving North Coast wine companies:
March 2013: Ramey Wine Cellars bought Westside Farms, 75 acres (42 in vineyards) Est: $4.95 million.
March 2013: Jackson Family Wines bought 828 acres in Oregon, with 42 acres planted and 300 acres plantable.
March 2013: Francis Ford Coppola bought Geyser Peak properties from EPR Properties (vineyards, winery, not brands) Est: $35.3 million.
March 2013: Carneros Vintners bought a custom crush facility from EPR Properties. Est: $12.5 million.
Jan. 2013: Bill Price of Classic Wines and Price Family Vineyards bought the 138-acre Gap's Crown vineyard from GI Partners.
Jan. 2013: Laird Family Estate bought Silverado Hill Winery (custom crush).
Dec. 2012: Foley Family Wines purchased Langtry Estate & Vineyards in Lake County (vineyards, brands).
Dec. 2012: Foley Family Wines bought 206-acre Ramal East Vineyard from EPR Properties. Est: $12-13 million.
Dec. 2012: Paul Hobbs acquired the 90-acre Tourmaline Vineyard in Napa Valley.
Nov. 2012: Jackson Family Wines bought 260 acres of vineyards, with 200 acres planted, from Saralee and Richard Kunde.
Nov. 2012: Foley Family Wines bought Lancaster Estate (winery, brands, vineyards).
Oct. 2012: Dominic Foppoli and partners bought Christopher Creek (winery, vineyards, brand). Est: $3-5 million.
Sept. 2012: E&J Gallo Winery bought Snows Lake Vineyard, a 2,300-acre property in Lake County.
Aug. 2012: West Coast Wine Partners bought Valley of the Moon Winery and Lake Sonoma Winery from Korbel (wineries, vineyards, brands).
Aug. 2012: Silver Oak bought Sausal Vineyards & Winery (winery, vineyards, brand). Est: $7 million.
July 2012: Vintage Wine Estates bought Weibel Vineyards & Winery in Hopland.
June 2012: Constellation bought Mark West from Purple Wine Co. for $160 million (brand, inventory).
June 2012: Duckhorn Wine Co. bought Ridgeline Vineyard, a 400-acre property with 90 planted acres, from Artesa Vineyards & Winery.
June 2012: Jackson Family Wines bought the 350-acre Ramal West Vineyard from EPR Properties. Est: $13 million.
June 2012: E&J Gallo bought Columbia Winery and Covey Run from Ascentia Wine Estates (brands only).
June 2012: Accolade Wines acquired Geyser Peak, Atlas Peak and XYZin from Ascentia Wine Estates (brands). Est: $26 million.
May 2012: Stonecushion Inc., a company owned by Ken Wilson, bought Blackstone Winery from Constellation Brands (winery, not brand.)
May 2012: Foley Family Wines bought Sawyer Cellars (vineyards and winery, not brand.) Est: $24 million.
March 2012: Wilson Artisan Wineries bought Pezzi King Vineyards (vineyards, brand) Est: $8.5 million.
Feb. 2012: PlumpJack Group bought Stelzner Vineyards. Est: $18.5 million.
Source: Press Democrat archives and data compiled by Zepponi Co.
Immediately after they saw the property, the couple sat down at a table in their Healdsburg home with a few key executives of their company, Ramey Wine Cellars, and each gave a thumbs-up to make an offer on the property.
"I absolutely felt that if we didn't move, somebody else would," said Ramey, describing the rapid-fire acquisition.
Since the start of 2012, dozens of North Coast wineries and premium vineyards have been sold, with an estimated $326 million — and possibly much more — changing hands in in a business where sales prices usually are kept under wraps.
The accelerated pace of deals in Wine Country reflects a recovering economy and a surging wine industry that's putting the pieces back together after tough years, experts said. Opportunistic companies with cash are looking to expand their brand portfolios and secure vineyard land as consumption of California wine grows steadily in the U.S. and abroad.
Meanwhile, a generation of winemakers are reaching retirement age and many are without children willing to take the reins. Others that struggled through the recession are seeking a comfortable exit. The bumper crop of 2012 nudged custom crush facilities into the mix, as wineries dealt with limited tank space.
The confluence of factors has led to a record number of transactions in the last year, industry analysts said.
"When you look at the 3,000 wineries that exist in the western U.S., the majority are really small wine owners," said Deborah Steinthal, founding partner of Scion Advisors. "That's why you're seeing land sales that have houses on them, and land sales that have a small winery. It's that dynamic that's going to take time. People retire, they get old, and they sell their business to their children or a third party."
A wave of turnover among vintners and grape growers is not unexpected. In 2007, Silicon Valley Bank and Scion Advisors surveyed hundreds of winery owners in California, Washington and Oregon, and found that 51 percent of owners anticipated going through a change in control of the winery during the ensuing decade.
While some of those ownership changes have happened, the recession slowed the pace of transactions, so there's still many to come, Steinthal said.
The Kunde family, which sold vineyards to Jackson Family Wines in November, and Pezzi King Vineyards, which was sold to Wilson Artisan Wineries, were examples of sellers motivated to resolve succession issues, she said.
Bill Foley, proprietor of Foley Family Wines, has sought out wineries that didn't have a succession plan, matching their owners' needs to exit with his desire to expand his brand portfolio and gain clout with distributors, he has said.
"We have seen a bit of a pick up," said Don Brian, principal at Global Wine Partners, a wine investment bank based in St. Helena. "Unlike some prior years here, when most of the deals might have been financially distressed, there's a lot more quality-oriented transaction opportunities for people now."
In 2007, when vineyard and winery valuations were approaching peak levels, it was a seller's market, according to an analysis by Zepponi & Co., a mergers and acquisitions advisory firm. Valuations peaked in mid-2008, around the time that Ascentia Wine Estates was formed to buy a collection of wine brands, including Geyser Peak, from Constellation for $234 million. But the meltdown in financial markets sent valuations tumbling, and consumers traded down to cheaper wines, leading to a buyer's market in 2009.
"In 2008, '09 and '10, almost all the sales were predicated on financial problems," said Joe Ciatti, principal at Zepponi & Co. "People were forced to sell, banks were putting pressure on them. It mirrored the economy and what was going on at that time. Those were ugly sales, for the most part. You couldn't sell a vineyard in 2009 if your life depended on it."
Distressed sales still are happening, but that trend has calmed as economic conditions improved. Public companies and institutional investors that bought big at the peak of the market also are cleaning up their balance sheets.
The California Public Employees' Retirement System, which has been unloading vineyard assets, needs to maintain a reasonable return on investments to ensure that its pension system remains funded. EPR Properties, which recently sold the Geyser Peak winery facility and vineyards, has a similar responsibility to investors to return a profit, which can be tricky in a cyclical business like the wine industry.
"We've seen corporate investors get into this historically for the last 30 years, and something happens in the market, and they say, 'Oh, let's get back to our core," said Rob McMillan, founder of the wine division at Silicon Valley Bank. "It doesn't look very good if you're a public company, expecting quarter-to-quarter growth. That's not what happens in a business that has a harvest once a year."
Coca Cola, Suntory and Pillsbury all had stints in the wine industry, he said.
As those public companies contracted, private companies like Jackson Family Wines, E&J Gallo and Foley Family Wines expanded. Buyers were more optimistic in 2011, and momentum began to build, accelerating in 2012, Ciatti said.
"You've got a fairly robust market for vineyards all over the area, and major buyers are still buying them," Ciatti said. "Users and investors are coming in, that sector's very strong. You've got large wineries wanting to get bigger, and they're wanting to buy vineyards and labels."
Those major players aren't finished expanding, and will continue to buy vineyards and brands in the next six months, analysts said.
"Coming out the recession, they're needing more vineyards," Steinthal said. "They need to have control over their sourcing to have quality grapes going into a high end bottle."
International investors are increasingly interested in getting into a wine market where demand is growing steadily.
"We're now the biggest wine market in the world, and we outstrip France and Italy, the traditional wine consuming countries, in total consumption," said Robert Nicholson, principal at International Wine Associates, the wine industry mergers and acquisition firm. "I think the future bodes well for future consumption."
The 2012 harvest reached record proportions in the North Coast and throughout California, when 555,830 tons of grapes were crushed in Sonoma, Napa, Mendocino and Lake Counties, boosting the value of the region's crop by 60 percent to $1.38 billion.
Barrel companies were running out of stock, and wineries and custom crush facilities were running out of space. That experience led Francis Ford Coppola Winery to buy the winemaking facility at Geyser Peak.
"We're experiencing throughout Northern California a pinch on production space," said Corey Beck, general manager at Coppola. "Our production has been growing. When we bought our winery in 2006, we had 20 Sonoma County growers. And now we have over 120 Sonoma Country growers."
Interest rates have fallen, making borrowing to finance a deal more attractive. Before the recession, interest rates were several points higher, McMillan said.
"The banks have become more hungry for debt, and that helps as well," McMillan said.
As the industry works through the remaining distressed sales, it heals, he said. "At some point you reach the other side, where good companies are buying good companies, and we're kind of into that range now," McMillan said.
Analysts expect the pace of deals to continue through the rest of the year.
"What happened in '12 has happened in '13," Ciatti said. "You're going to see a lot of transactions on the wine label side, the winery side, and the vineyard side. It hasn't slowed down."
(You can reach Staff Writer Cathy Bussewitz at 521-5276 or email@example.com or on Twitter @cbussewitz.)
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